TPR welcomes NCA statement on LDI funds and issues guidance on maintaining LDI resilience

1 December 2022

The Pensions Regulator (TPR) has welcomed statements made today by the Central Bank of Ireland (CBI – Ireland) and the Commission de Surveillance du Secteur Financier (CSSF – Luxembourg), known collectively as National Competent Authorities (NCAs), on resilience of Liability Driven Investment (LDI) funds.

In response to the NCA statement, TPR has issued its own guidance statement calling on scheme trustees who use LDI to maintain an appropriate level of resilience in leveraged arrangements to better withstand a fast and significant rise in bond yields. The statement also calls on trustees investing in leveraged LDI to improve their scheme’s operational governance.

TPR Chief Executive Charles Counsell said: “LDI funds are regulated in the country their provider is based and in most cases, these are EEA countries. We are very pleased therefore to see these joint statements from regulators in Ireland and Luxembourg setting clear expectations for the resilience of LDI portfolios.”

“Accordingly, we have now issued a guidance statement for trustees and advisers confirming our expectations for the use of LDI funds. I urge trustees to read the statement and consider how they can meet the steps it outlines to ensure their scheme buffer is sufficient to cover a swift and substantial increase in yields at the level set by the NCAs.”

“We continue to work closely with other regulators to ensure we learn from the challenges we have seen in recent weeks.”

Source: TPR